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Overview of the Texas Workers’ Compensation Program

Workers’ compensation is a state-regulated insurance program that pays medical bills and replaces some lost wages for employees who are injured at work or who have work-related diseases or illnesses. Texas workers’ compensation legislation was first enacted in 1913. This legislation has been revised many times over the past 85 years with the last revision occurring during the 2001 Legislature.

Since January 1, 1991, workers’ compensation benefits have been administered through the Texas Labor Code, Title 5, Subtitle A. This act ensures that injured workers, including those working for state agencies, are compensated fairly and appropriately for workplace injuries. The act provides:

  • employers’ voluntary participation;
  • workplace heath and safety programs;
  • a dispute resolution process with an ombudsman to provide legal assistance to injured workers;
  • guidelines for medical fees and treatment to control medical costs; and
  • oversight by the Research and Oversight Council (ROC).[1]

A significant change for all carriers participating in the workers’ compensation program was made to the reimbursement policy by the 2001 Legislature in House Bill (H.B.) 2600. H.B. 2600 changed the wording of Section 413.011 (a) of the Texas Labor Code to read:

“The commission shall use health care reimbursement policies and guidelines that reflect the standardized reimbursement structures found in other health care delivery systems with minimal modifications to those reimbursement methodologies as necessary to meet occupational injury requirements. To achieve standardization, the commission shall adopt the most current reimbursement methodologies, models, and values or weights used by the federal Health Care Financing Administration, including applicable payment policies relating to coding, billing, and reporting, and may modify documentation requirements as necessary to meet the requirements of Section 413.053.”[2]

This change in the Texas Labor Code mandates the TWCC adopt medical guidelines using the federal government’s payment policies. It also abolished existing TWCC treatment guidelines. These changes did not affect this study because the sample dates were from 2001 and the new medical fee and treatment guidelines went into effect on September 1, 2002. However, they affect the Comptroller's recommendations for remedying the discrepancies found in the study. This impact is discussed further in the State Employees Workers' Compensation study findings section.

Fraud and Abuse Within the Texas Workers’ Compensation System
According to TWCC, fraud costs the Texas workers’ compensation system and Texas employers millions of dollars each year. The Texas Workers’ Compensation Commission’s (TWCC) Office of Investigations works with numerous special investigation units to prosecute those who commit fraud. These units include state and federal law enforcement officials, other regulatory agencies and insurance carriers.

Employers, employees, health care providers, attorneys, insurance agents and others can commit fraud. TWCC includes a list of fraud indicators on their web site for employers, employees, attorneys and health care providers. The commission’s Office of Investigations maintains a hotline for receiving information on fraudulent activity. The office evaluates reports to determine which are appropriate for further investigation.[3]

In January 1998, the ROC reported “It is impossible to determine with certainty the amount of fraud in the Texas system because insurance carriers are not required to report fraud. The most common type of fraud referred to, and investigated by, the TWCC is injured worker benefit fraud.”[4]

This finding prompted ROC to study the detection of fraud and abuse within the Texas workers’ compensation system and similar systems in other states. The study looked at the extent of fraud, efforts to detect and prevent fraud in Texas, compared Texas efforts with other states and identified how the program could be improved. The study concluded that effective prevention programs have at least five common factors. They:

  1. identify a focal point or single agency, such as a state’s attorney general, responsible for fraud investigation and prosecution;
  2. dedicate legal resources for insurance fraud prosecution and investigation training programs. Also, they have specific insurance fraud statutes that improve juror understanding of prohibited conduct;
  3. have high-profile public awareness campaigns to deter fraud;
  4. use fraud detection systems with significant data automation and research capabilities coordinated between state agencies and insurance carriers; and
  5. assess state insurance carriers to provide adequate funding for enforcement programs.[5]

ROC has performed several research studies of Texas workers’ compensation insurance carriers, including the State Office of Risk Management (SORM), to identify ways to cut costs, improve program policies and improve the quality of benefits provided. In most of these studies, the goal is to reduce the rising costs of medical care, since Texas has the highest workers’ compensation medical costs in the nation.

H.B. 2600 addressed many of the issues relating to Texas’s high medical costs and quality of care. ROC plans to analyze the impact of the changes from H.B. 2600 with a series of research studies conducted from 2003 through 2005.


[1] Texas Workers’ Compensation Commission, “History of Workers’ Compensation in Texas,” (Austin, Texas), (Last visited January 16, 2003.)

[2] Texas Workers’ Compensation Commission, Texas Workers’ Compensation Act (77th Legislature, 2001), (Austin, Texas, December 14, 2001), (Last visited January 16, 2003.)

[3] Texas Workers’ Compensation Commission, “Fraud Costs Texans Millions,” (Austin, Texas), (Last visited January 16, 2003.)

[4] The Research and Oversight Council on Workers’ Compensation, “Fraud in the Texas Workers’ Compensation System” (Austin, Texas), (Last visited January 16, 2003.)

[5] Research and Oversight Council on Workers’ Compensation, “Fraud Detection and Prevention in the Texas Workers’ Compensation System,” (Austin, Texas, August 2001), (Last visited January 16, 2003.)